[Calc Review] First deal under contract - looking for feedback
*This link comes directly from our calculators, based on information input by the member who posted.
Hi everyone!
I just put this duplex under contract; if I close on it, this will be my first out of state deal. It's located in a desirable / up and coming neighborhood (Hixson, TN), has good tenants, and seems well taken care of (will be verifying that with inspections shortly though). If the inspection results indicate no major fixes are needed, it will have that going for it, plus it's located in a low crime area, and the target tenant for this kind of residence is less likely to trash the place (B+ neighborhood). However, as you can see from the calculator, a 6% cash on cash ROI for that much money invested is not exactly stellar returns.
At this point, I'm leaning towards moving forward with the deal - primarily to learn hands on and to build momentum for future investment property purchases. About a year from now, I should have an influx of cash available for additional deals, so I want to be in a position to deploy that capital wisely. I want to go through the experience of purchasing the property, establishing a relationship with my PM there, and working with contractor(s) to make some renovations once the first tenant leaves. I feel like this property would offer a relatively safe environment to gain those experiences. In the future, as I build relationships in the market and gain experience, I do plan to target properties with better ROI.
Would love to hear feedback from folks on my planned approach
Thank you!
I agree with your assessment of the deal. Not great, but not bad either. Since it is in an up and coming area, that is good for potential appreciation over time.
I don't think its a bad idea to get your feet wet with this deal (as long as you are comfortable with everything). This experience will probably help you a lot once you have the additional cash a year from now.
Howdy @Daniel Soovajian
Your analysis looks good (conservative). You will find that the ROI tends to be lower percentages in nicer neighborhoods ( A & B). Cash Flow is also typically lower. Your $163 per unit is very reasonable. Hope the inspection go's well. Be sure to include any future renovations in the CapEx reserves (if you haven't already). Good luck.
